Paul Andrews

The exuberant equities market recovery from Q1 2020’s pandemic-induced fall has come too quickly according to a global survey of CFA members, almost half of which believe a correction is on the cards in the next three years.

Equity markets are perceived to have progressed “out of pace” with the real economy, the Covid-19, one year later report states, with excessive monetary stimulus measures being the main driver.

“A plurality of respondents globally expressed the view that equities in their respective markets (45 per cent) and global developed markets in general (43 per cent) have recovered too quickly from the market slump in February–March 2020 and are due for a correction within the next one to three years,” the paper states.

Few of the CFA members surveyed believe equity markets are currently balanced, the survey revealed.

“In all configurations, the proportion of respondents who believe that equities are properly valued is low in all regions (2–16%). Overall, the view seems to be that global developed market equities are more overvalued than those in emerging markets.”

The CFA Institute survey went across 6,040 members globally in March this year.

Commenting on the results, CFA Institute managing director of research, advocacy and standards Paul Andrews said the it highlighted a number of areas of concern where “unintended consequences” may already be insight.

“With authorities ready to do whatever it takes to prevent a liquidity crisis in the markets, the economic stimulus unleashed to address the crisis may well have consequences of its own,” Andrews said.

Respondents are predicting an economic recovery that will take different pace around around the world, Andrews continued, as well as “a potential for monetary stimulus addiction, tax hikes, emerging regulatory risks and questions over the actual financial health of corporates”.

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